Assess product contribution after returns, advertising and marketplace fees

Choose an order cohort that can be compared fairly

Specify the product, store, operating entity and order period, together with the after-sales observation cutoff. Recent orders with substantial return exposure are not directly comparable with older, settled cohorts. Keep estimated future refunds and their assumptions separate from completed refunds; a projection is not actual profit.

Prepare orders and refunds, platform charges and fee reversals, actual goods costs, inventory movements and return inspections, fulfilment records and advertising statements. Where costs change over time, follow the applicable costing method rather than applying today's purchase price to every historical sale.

The Shopify profit-report documentation notes that missing product-cost information affects report coverage and that discounts and refunds affect margin readings. This supports checking definitions first. It does not establish that mainland marketplaces use the same definitions, or that CaiGeek is connected to Shopify.

Reconstruct net sales and returned-goods costs together

The original order value may not be the right revenue starting point. Reconcile discounts, partial refunds, refunds without returns and cancellations separately. Do not deduct refunds again from an export that already reports net sales. Likewise, starting with settlement proceeds after commission and then subtracting that commission again understates the result.

Separate the condition of returned goods. Items inspected and restored to saleable inventory should not all remain in the goods consumed by this completed sales cohort. Damaged, lost or unrecoverable goods retain their actual loss. Keep returned quantities, restocked quantities and corresponding cost together; a successful refund does not prove that the goods came back in saleable condition.

If net goods cost already includes damaged-stock losses, do not add those losses again. For extra return freight, inspection or refurbishment, first check whether the same costs already appear in fulfilment charges.

Do not manufacture precise margins from uncertain allocation

Reconcile marketplace and creator fees to actual charges, reversals and amounts still awaiting repayment. A customer refund does not mean every fee will be refunded. Use a defensible advertising attribution basis, such as a product-specific campaign, instead of assigning all shared spend to the highest-selling item.

When shared brand advertising cannot be reliably allocated, show contribution before that advertising alongside the shared spend, then compare explicit allocation scenarios. An allocation assumption is not a directly observed fact. Explain the basis for shared discounts, gifts and freight too. Keep comparisons consistent and explain the effect of any methodology change.

A worked example including returned stock

This is a hypothetical illustration in RMB. It uses a consistent management-analysis basis: sales exclude output VAT and costs exclude recoverable input VAT. A finance professional must determine the appropriate treatment for the actual business. In this example, after-sales activity is complete, with no further pending refunds, subsidies, compensation or unallocated shared advertising.

The business shipped 1,000 units of one product, each sold for RMB 100 with goods cost of RMB 50. Customers returned 150 units for full refunds. Inspection restored 120 units to saleable stock; 30 had no recoverable value. Original shipped cost was RMB 50,000. Restocked cost was RMB 6,000, leaving net goods cost of RMB 44,000. This already includes the RMB 1,500 loss on the 30 damaged units.

Marketplace and creator fees below are net of reversals. Advertising belongs only to this product; extra return costs are not already in goods cost or original outbound fulfilment.

85,000 − 44,000 − 8,500 − 4,000 − 12,000 − 1,500 = RMB 15,000. Dividing by net sales gives a contribution margin of approximately 17.65%. Unlisted payroll, rent, shared administration, financing costs and applicable taxes or charges remain outside this measure. It is not complete net profit.

Deducting the original RMB 50,000 goods cost and then adding the RMB 1,500 damaged-stock loss would miss the restored inventory and double-count that loss. Conversely, restoring the cost of all refunded units to inventory would omit the loss on the 30 unsaleable units.

Use the result to decide what to investigate

Break the change into selling price and discounts, returns and losses, fees, advertising efficiency and product mix. Compare periods or scenarios on a consistent basis. Positive contribution means this defined scope leaves something behind; it does not alone justify more advertising. Marginal advertising performance, fees, fulfilment capacity and cash constraints may change for the next batch.

A rising return rate is not automatically a product-quality problem. Check evidence about channels, promises, sizing or specifications, logistics and the customer mix before attributing all the change to a person or platform.

Keep profit and cash timing separate. Restocking saleable goods reduces the goods consumed by this cohort, but does not immediately return the original purchase cash. Unsettled platform balances, replenishment payments and refund timing still affect liquidity.

Continue with a specific business question

Retain the order cohort, after-sales cutoff, fee definitions and unmatched items. Address the gap that matters most to the decision first. For planning a campaign, continue with assessing whether a promotion is worthwhile. For payment timing, see cash-flow planning.

The CaiGeek operating-profit analysis example illustrates how a question about declining profit can be developed. Actual data access and professional treatment depend on business facts, authorization and verified capabilities. To discuss a suitable product or service arrangement, use the official contact page and describe the business and intended decision. Do not submit raw orders or customer information in public comments.